TEXAS PROPERTY TAX LEGISLATION 2023:
BIG CHANGES ON THE HORIZON

Written by: William Marchbanks

The Texas Legislature held hearings on July 11, 2023, and will likely pass Property Tax Relief legislation in the coming days. The total cost of the bill is expected to surpass $18 billion. Details are not final; however, the expected passage of the bill will no doubt have a significant impact on the Texas property tax system.

While the legislation institutes change to appraisal district governance and administrative functions regarding the appraisal rolls, the key points for Texas taxpayers facing annual escalations in property tax include:

• Imposing an annual 20% cap on the appraised value of real property. The cap will impact properties valued at $5M or less starting in the 2024 tax year. The value qualifying for the cap will be adjusted up or down by the CPI each year to redetermine the ceiling. The cap is set at 20% with a sunset date of December 31, 2026.

• Significant compression (reduction) of school districts’ M&O tax rates.

• The Residence Homestead school district exemption increases from $40,000 to $100,000.

• Legislation will also include savings on the franchise tax for small businesses and create newly-elected positions on local appraisal boards.

These changes will require voter approval, as a Texas constitutional amendment is required. While tax rate reductions (compression) and an increase in resident homestead are welcoming news to Texas residents, the addition of appraisal caps in any form is concerning. Over time, these caps can lead to inequities in the appraisal rolls and an increase in the barrier of entry to property ownership for businesses and homeowners because new buyers are not protected by the caps.

The DMA property tax team anticipates the Legislature will act quickly on this matter and will provide updates as things progress. For additional information regarding this legislative update, or to stay current on your property tax compliance, contact our property tax team.